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2019 (10) TMI 123 - AT - Income TaxDeduction u/s 11 - principle of mutuality - income of the assessee is received from members as well as non members - assessee being a trade association of software industries - HELD THAT - It is not in dispute that the income of the assessee is received from members as well as non members. The income from the non members has been offered to tax by the assessee whereas membership fee from its own members is claimed as exempt on the principle of mutuality. Ld. CIT(A) held that the assessee being a trade association of software industries, it s main object being to promote and protect the interest of its members, membership received from its own members comes within the principle of mutuality. To this extent, it does not admit any doubt and the catena of decisions relied upon by the assessee hold so. Once the assessee is governed by the principle of mutuality, even if there are difference class of members, some of whom are not entitled to vote, the club would not be cease to be governed by principle of mutuality. In this case, as already stated, the assessee had offered to tax the income derived from the receipts from the non members. In so far as the members are concerned, there is no dispute as to the identity between the contributors and the participators. Case law relied upon by the ld. AR supports the view taken by the ld. CIT(A) on the aspect of principle of mutuality and the entitlement of the assessee to claim the benefit of Section 11 of the Act. We, therefore, uphold the same and find the grounds of appeal as devoid of merits. - Decided against revenue
Issues:
1. Exemption under Section 11 of the Income-tax Act denied by the Assessing Officer. 2. Appeal filed by the revenue against the order of the Commissioner of Income-tax (Appeals). 3. Application of the principle of mutuality in determining tax exemption for the National Association of Software and Service Companies (NASSCOM). 4. Variance in membership fees and voting rights affecting the claim for exemption under the principle of mutuality. 5. Dispute regarding the nature of activities conducted by NASSCOM and its eligibility for tax exemption. Issue 1: Exemption under Section 11 denied by the Assessing Officer The Assessing Officer observed a variance in the fees received by NASSCOM from its members and non-members during the assessment proceedings for the Asstt. Year 2009-10. Consequently, the Assessing Officer denied the exemption under Section 11 of the Income-tax Act and assessed NASSCOM's income at ?9,04,40,180. Issue 2: Appeal filed by the revenue against the CIT(A) order The revenue filed an appeal challenging the order of the Commissioner of Income-tax (Appeals) dated 13.9.2013, where the Commissioner upheld the contentions of NASSCOM regarding the principle of mutuality and the exemption under Section 11 of the Act. The revenue contended that NASSCOM's activities fall under the purview of Section 2(15) of the Act and should not be granted tax exemption. Issue 3: Application of the principle of mutuality NASSCOM, a trade association of software industries, claimed exemption under the principle of mutuality for the membership fees received from its members. The Commissioner of Income-tax (Appeals) considered NASSCOM's submissions and the relevant case laws, concluding that the membership fees come within the principle of mutuality, making the income from its own members exempt from tax. Issue 4: Variance in membership fees and voting rights The revenue argued that the variance in membership fees, types of members, and voting rights affects NASSCOM's eligibility for exemption under the principle of mutuality. However, NASSCOM's representative cited various case laws to support the argument that such variances do not impact the application of the principle of mutuality. Issue 5: Dispute regarding NASSCOM's activities and tax exemption The revenue contended that NASSCOM's activities, including receiving fees from both members and non-members, do not qualify for tax exemption under the principle of mutuality. However, NASSCOM maintained that its main objective is to promote and protect the interests of its members, justifying its claim for tax exemption based on the principle of mutuality. In conclusion, the Appellate Tribunal upheld the Commissioner's decision, stating that NASSCOM's income from its members falls within the principle of mutuality, making it exempt from tax. The Tribunal emphasized that the variance in membership fees and voting rights does not affect NASSCOM's eligibility for tax exemption under the principle of mutuality. The Tribunal dismissed the revenue's appeal, affirming NASSCOM's entitlement to claim the benefit of Section 11 of the Income-tax Act.
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